The Spemann's organizer (the dorsal lip of the blastopore) is well known for its ability to produce diffusible factors that "dorsalize" surrounding mesodermal tissue. The secreted BMP antagonist chordin, is expressed in the organizer and is partially responsible for blocking BMP signaling to maintain the dorsal cell fate. Chordin inhibits BMP signaling by sequestration of BMP ligands from their cognate cell surface receptors. Thus, chordin is a candidate-secreted factor that may play a role in dorsalization by inhibiting the "ventralizing" action of BMPs in the surrounding mesodermal tissue. BMP1 encodes in astacin family metalloprotease related to Drosophila Tolloid (TLD) and plays a critical role in regulatory the inhibitory activity of chordin by proteolytic inactivation of the chordin molecule. In this proposal, we propose to study the possible role of chordin in establishing a graded BMP signal in the Xenopus embryo and to examine the role of BMP1 role in establishing this gradient via chordin inactivation. Our specific plans are 1) to unravel the action of endogenous BMP1 by fully characterizing how a dominant negative version of BMP1 functions in order to understand the action of the endogenous protein, 2) to investigate whether BMP1 limits the diffusion of chordin by inactivating its activity after proteolytic cleavage, and 3) to examine whether there is a gradient of BMP activity in embryos. BMPs are expressed in various tissues that play fundamental roles in the process of mesoderm patterning, osteogenesis, neurogenesis, and limb formation. Thus, in depth understanding the regulation of BMP signaling will be important, and our approach provides an opportunity to dissect the extracellular regulation of BMPs.